A Resource-Based Theory of Hyperspecialization and Hyperscaling in Post-Chandlerian Digital Firms

Compared to enterprises of the past, digital firms tend to be simultaneously narrower in their vertical scope and larger in their scale. We explain this phenomenon through a theory about how attributes of a firm’s resource bundle impact its scale and specialization. In particular, we highlight that the high scalability of digital firms’ resource bundles may drive “hyperspecialization” and “hyperscaling” due to the opportunity costs of not intensively deploying these resources. We use descriptive theory and a formal model to develop a number of propositions that are consistent with observed features of digital businesses. Our research provides a parsimonious modeling framework for future resource-based theorizing about digital firms, and sheds light on the far-reaching ways that technology-enabled resources are reshaping firms in the digital economy.